Stats of the Week November 14, 2014

Every week we compile lots of interesting stats here at Fanscape and we try to share a lot of what we learn with you in these posts.

Online Grocery Sales will Grow from $23 Billion in 2014 to Nearly $100 Billion by 2019

Online shopping has exploded over the past decade with consumers avoiding busy stores for the convenience of shopping 24/7 anywhere that has Wi-Fi. We typically associate online shopping with the holiday season, but in reality, consumers are using the net to buy everything from flowers and clothing to electronics, music and even caskets (you gotta love Costco).

Over the past few years food and beverage marketers have used the internet and social media to promote their brands to billions of consumers worldwide, which creates an enormous potential for online sales.

While online grocery shopping is currently one of the smallest segments for food and beverage sales, this rapidly changing business is poised for tremendous growth over the next several years. According to a new report from Packaged Facts, online grocery sales will grow from $23 billion in 2014 to nearly $100 billion by 2019, capturing 12 percent of total grocery spending, according to a new report from Packaged Facts.

“Meeting at the crossroads of technology and service, online grocery shopping offers the grocery industry’s most exciting potential because it is the fastest-growing channel in the grocery arena,” said Packaged Facts research director David Sprinkle. “It’s clear that U.S. consumers have become increasingly comfortable with shopping for groceries via Internet and reliant upon home delivery and easy pickup of pre-picked orders.”

The online grocery business has become crowded with participants—some well-established, and many of which entered this business only in the past two years. To date, fewer than a dozen online grocery services with the potential to be viable on a national level or across a wide swath of the country have emerged from the fray. Although they are still at early stages of test-marketing, companies such as Amazon.com and Walmart have a leg up in operating nationwide online grocery services because of their large infrastructures of warehouses dotting the country, advanced logistics and delivery systems, clout with suppliers, and wide assortment of products—resulting in the potential to cross-sell and deliver high-ticket and more profitable items in the same order, shipment or truck.

In contrast, supermarkets (even the nation’s largest chains) operate primarily under regional or local banners. And while few major players have emerged as yet, all across the United States, both in cities and suburbs, a multiplicity of local grocers and shopping/delivery services are springing up under the radar.

But the online grocery business has unique challenges as it strives to reach its potential. According to the “Online Food Shopping and Grocery Delivery in the U.S.: Future of Food Retailing” report, over the next five years, online grocery service providers will develop models that solve the logistics problems while being profitable for the operators. As this happens, online services will become more widely available throughout the country and consumers will become more confident in shopping for food and beverages online. It’s expected for these developments to take place in leaps and bounds as, for example, Amazon Prime Pantry rolls out across the country, AmazonFresh spreads to more cities, and more retailers get on board the United States Postal Service’s planned delivery system.

Interestingly, a 2013 report by Packaged Facts found a trend of major changes in grocery retailing. According to the report, the greatest competition to supermarkets and grocery stores is from supersized stores like supercenters and warehouse clubs, however other retail channels like drugstores, dollar stores, limited assortment chains and online grocery shopping also pose a great threat. Data also showed 83 percent of shoppers cited being satisfied with the store(s) where they usually shop for groceries, 56 percent enjoy grocery shopping and 18 percent actively dislike grocery shopping. This suggests that retailers have room to improve in making grocery shopping easier, less burdensome and enjoyable for a significant amount of their customers.